Private Equity - Safe haven for Family Offices? Some insights
regarding asset allocation, investment criteria
and regional focus
Prestel & Partner, Family Office Forum, Zurich 2014
Zurich, November 2014
© Family Office Consulting GmbH, 2014
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The largest Family Office-Study in Germany ever: Interviews concerning
Private Equity & Venture Capital with approximately 190 Family Offices!
Selected Structural Data of Participating Family Offices
Family Office
Segments:
Single Family Offices (SFO; n=127)
Multi Family Offices (MFO; n=54)
5%
≤ 50 million 28
14
≤ 100 million 82
13
Bank-Related Family Offices (BFO; n=9)
28%
67%
AuM (in million EUR):
•
Participants: 190 Family Offices
•
Method: Telephone Interview
≤ 250 million 186
26
•
Research conducted: Q1-2014
≤ 500 million 365
23
•
AuM: >140 billion EUR
≤ 1 billion 866
16
•
Average AuM: 930 million EUR
≤ 2.5 billion 1,761
18
•
26 family offices, AuM > 1 billion EUR
> 2.5 billion
Ratio in %
(n=190)
© Family Office Consulting GmbH, 2014
5,875
8
Average AuM
(n=190; n.a.=37,9%)
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German Family Offices holding off on PE-/VC investments
in comparison to Swiss Family Offices
Current Average Asset Allocation of those Family Offices participating
Portfolio Ratio in Per Cent
Alternative Investments
34%
33%
33%
28%
26%
20%
14%
12% 10%
11%
15%
7%
5%
Stocks
Bonds
20%
15%
9%
3%
15%
1%
Average Switzerland 2014*
* Source: Research, Family Office Consulting GmbH
Private
Equity
4%
1%
2%
Venture
Capital
6% 1%1%
Hedge
Funds
•
In comparison to Benchmark: PE-affine German
Family Offices as participants of current market
study, therefor less real assets
•
Investments in Venture Capital by German
Family Offices represented marginally
•
By far higher affinity to Alternative
Investments amongst Swiss Family Offices
Average Germany 2014*
© Family Office Consulting GmbH, 2014
3%
Other
Alternative
Money market Real
Estate Real Assets Investments
Cash
Market Study PE&VC Germany 2014
11%
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When selecting external managers for PE-/VC investments, German
Family Offices attach high importance to historic Track Record
Selection of decision criteria for an external manager
Selection criteria for external managers
Track Record
64
Competency, Know how, Expertise
27
People, Team, Management
25
Name, Reputation
23
Creditworthiness, Reliabilty, Trust
9
Strategy
8
Line of business, Specialization
5
Own Investment of Manager
4
Investment model
4
Transparency
4
Fees
2
Other
• Three-fourths of those Family Offices
who confirm know how in Private Equity
& Venture Capital exclusively work with
well-established providers
• 30% of those Multi Family Offices
participating are interested in
„first time funds“
• 16% of those Single Family Offices
participating show investment
interest in „first time funds“
26
Number of nominations
(n=190; several nominations possible)
© Family Office Consulting GmbH, 2014
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PE-/VC-Investments outside of Germany, Austria and Switzerland
are typically not the case amongst German Family Offices
Attractive Investment Regions in Private Equity & Venture Capital
Germany (n=190)
51%
49%
Germany
37%
Austria / Switzerland
62%
Europe (except
Germany, Austria, Switzerland)
36%
53%
30%
USA
Canada
South America
Switzerland (n=47)
40%
15%
36%
7%
38%
Middle East
4%
26%
Asia
19%
43%
Australia, New Zealand, Oceania
8%
23%
Africa
7%
32%
• Preferred target region
is the country of origin
• Swiss Family Offices are much more
invested internationally than
German Family Offices
• Swiss Family Offices have a higher
investment affinity to Asia and
South America
• Swiss Familiy Offices also frequently
consider Africa, Middle East, Oceania
and North America as
attractive regions
Attraction level in per cent
© Family Office Consulting GmbH, 2014
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Whether own PE-/VC-Investments or external mandates Many German Single Family Offices lack experience…
Experience with Investments in Private Equity & Venture Capital
Private Equity
54%
46%
56%
44%
Own investments
59%
41%
41%
43%
63%
59%
57%
37%
33%
56%
Experience with funds actively
managed by third parties
67%
44%
• MFO are frontrunners regarding
own investments
Venture Capital
65%
65%
35%
35%
Total
(n=190)
© Family Office Consulting GmbH, 2014
(Both options possible)
69%
31%
69%
31%
SFO
(n=127)
56%
44%
59%
41%
MFO
(n=54)
44%
78%
56%
• BFOs prefer to allocate money to
external parties
• Large Family Offices have
considerably more experience
with Private Equity
22%
BFO
(n=9)
SFO=Single Family Offices; MFO=Multi Family Offices;
BFO=Bank-related Multi Family Offices
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…Swiss Family Offices, however, have a considerably larger
Treasure Trove of Experience
Experience with Investments in the area of Private Equity & Venture Capital
Private Equity
32%
32%
68%
68%
Own investments
11%
89%
21%
33%
19%
Experience with funds actively
managed by third parties
79%
67%
81%
(Both options possible)
Venture Capital
43%
57%
Total
(n=47)
© Family Office Consulting GmbH, 2014
43%
57%
32%
68%
42%
38%
58%
62%
SFO
(n=19)
24%
• SFO are extraordinarily experienced
regarding own (direct) investments
• MFO are clear frontrunners regarding
the allocation of external mandates
76%
MFO
(n=21)
SFO=Single Family Offices; MFO=Multi Family Offices
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German Family Offices often have no clear strategy and no profound
knowledge regarding Private Equity & Venture Capital…
Existence of own strategy and own experts for Private Equity & Venture Capital within a team
Existence of own PE & VC strategy
64%
36%
48%
71%
52%
29%
56%
56%
46%
38%
44%
54%
SFO
(n=127)
MFO
(n=54)
Total
(n=190)
© Family Office Consulting GmbH, 2014
•
Only one third of the participating Family Offices
have a strategy and corresponding team
members regarding PE & VC
•
Much higher professionalism amongst Family
Offices above 500 Mio. EUR AuM and
amongst Multi Family Offices
44%
Existence of own PE & VC team members
62%
Yes
No
69%
31%
BFO
(n=9)
SFO=Single Family Offices; MFO=Multi Family Offices
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.... contrary to Swiss Single Family Offices who have a higher
level of professionalism with regard to strategy and team
Existence of own strategy and own experts for Private Equity & Venture Capital within a team
Existence of own PE & VC strategy
57%
43%
42%
58%
62%
Yes
No
•
More than 40% of the Swiss Family Offices
participating have a strategy and an experienced
team regarding Private Equity und Venture Capital
•
About two third of the Swiss Single Family Offices
participating have a strategy and an experienced
team regarding Private Equity und Venture Capital
38%
Existence of own PE & VC team members
37%
57%
67%
63%
43%
Total
(n=47)
© Family Office Consulting GmbH, 2014
33%
SFO
(n=19)
MFO
(n=21)
SFO=Single Family Offices; MFO=Multi Family Offices
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Investment signals for PE/ PE/VC amongst German Multi Family Offices,
rather moderate ambitions amongst German Single Family Offices
Ratio of German Family Offices with already settled and/or planned investments within the next 12-24 months
Planned Investments
Private Equity
Settled Investments
60%
40%
33%
41%
75%
70%
72%
76%
30%
89%
67%
59%
25%
28%
24%
• Average performance expectation:
PE: 12,1%, VC: 16,7%
11%
Venture Capital
82%
77%
23%
18%
Total
(n=190)
© Family Office Consulting GmbH, 2014
85%
15%
82%
18%
SFO
(n=127)
63%
37%
89%
44%
19%
MFO
(n=54)
• Focus: Direct Investments Germany,
EU; at times single funds USA
or Asia
• Selection focus/subjects (i.a.):
Pharma, IT/E-Commerce, New
Media, Infrastructure
56%
81%
• Investments: Direct: > 50%, FoF:
21%, Single Funds: 16%
11%
BFO
(n=9)
• 66% of Family Offices who have
already invested plan further PE-/
VC-Investments
SFO=Single Family Offices; MFO=Multi Family Offices;
BFO=Bank-related Multi Family Offices
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Clear PE-/VC-Investment signals amongst Swiss Multi Family Offices,
even stronger ambitions amongst Single Family Offices
Ratio of Swiss Family Offices with already settled and/or planned investments within the next 12-24 months
24%
Planned investments
Settled investments
• Average performance expectation:
Private Equity: 14,4%, Venture
Capital: 16,6%
76%
• Investments: Direct investments:
61%, FoF: 4%, Single Funds: 27%.
Private Equity
45%
36%
37%
26%
55%
64%
63%
74%
38%
62%
• Focus: Direct investments, widely
spread internationally, single funds
Africa, MENA, South America
Venture Capital
67%
• Selection focus/subjects (i.a.):
Pharma, Food, Industry,
Renewable Energies
33%
• More than 70% of Family Offices who
have already invested plan further
PE-/VC-Investments
38%
58%
70%
63%
68%
62%
42%
30%
Total
(n=47)
37%
32%
SFO
(n=19)
MFO
(n=21)
SFO=Single Family Offices; MFO=Multi Family Offices
© Family Office Consulting GmbH, 2014
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How family offices from Germany and Switzerland try to manage the
balance between achieving profit and preserving wealth - examples (1/3)
Case A
Case B
Structure
Multi Family Office (three families)
400 Mio. EUR AuM, 20 FTE
Structure
Single Family Office
160 Mio. EUR AuM, 2 FTE
History
Family sold business 40 yrs ago
History
Entrepreneur, business sold 3 yrs ago
Main Goals
1.
2.
3.
4.
Main Goals
Expected ROI
> 6% p.a.
Expected ROI
> 10 % p.a.
Asset Allocation
Equities:
0%
Bonds:
0%
MM/Cash:
10%
Real Estate (Core):
90%
• 85% Germany
• 10% Switzerland
• 5% US
• Property management in-house
AI:
0%
Real Assets:
0%
Asset Allocation
Equities:
10%
(German/European blue chips)
Bonds:
10%
(European corporate bonds)
MM/Cash:
0%
Real Estate:
70%
(Germany, project development)
AI (commodities):
10%
Real Assets:
0%
Strategy
Inflation protection
Preservation of capital
Direct influence
Continuous cash flows
The somewhat old-fashioned,
still successful conservative way
!
Strategy
1. Continuous cash flows
2. Direct influence
!
The opportunistic real estate guy
AuM = Assets under Management, FTE = full time equivalents, ROI = Return on investment, MM = money market, AI = Alternative investments
Source: Research, Family Office Consulting GmbH
© Family Office Consulting GmbH, 2014
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How family offices from Germany and Switzerland try to manage the
balance between achieving profit and preserving wealth - examples (2/3)
Case C
Structure
Multi Family Office
3,000 Mio. EUR AuM, 14 FTE
History
Bank, around 40 clients
Main Goals
1.
2.
3.
4.
Continuous cash flows/liquidity
Inflation protection
Preservation of capital
No direct influence
Expected ROI
> 3% p.a.
Asset Allocation
Equities:
15%
(Europe, Emerging markets)
Bonds:
55%
(German/European government and
corporate bonds)
MM/Cash:
15%
Real Estate:
10%
(Core, Germany)
AI (commodities, gold):
3%
Real Assets:
2%
Strategy
Case D
The traditional institutional way
Structure
Single Family Office
Started as virtual Family Office, over
the years insourcing of the asset
management expertise
800 Mio. EUR AuM, 9 FTE
History
2. generation, (business sold some
20 years ago)
Main Goals
Achieving profit
Expected ROI
> 15 % p.a.
Asset Allocation
Equities:
10%
(German/European blue chips)
Bonds:
5%
(Corporate bonds)
MM/Cash:
5%
Real Estate:
35%
(Core plus, Germany, Europe, US)
AI
35%
(PE, fund of funds, single funds):
Real Assets (shipping):
10%
!
Strategy
!
More modern, typical real estate focus
balanced with Private Equity
AuM = Assets under Management, FTE = full time equivalents, ROI = Return on investment, MM = money market, AI = Alternative investments, PE = Private Equity
Source: Research, Family Office Consulting GmbH
© Family Office Consulting GmbH, 2014
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How family offices from Germany and Switzerland try to manage the
balance between achieving profit and preserving wealth - examples (3/3)
Case E
Case F
Structure
Single Family Office
2,000 Mio. EUR AuM, 29 FTE
Structure
Single Family Office
7,000 Mio. EUR AuM, 100 FTE
History
2. generation, inherited wealth
History
Successful, active entrepreneur
Main Goals
1.
2.
3.
4.
5.
Managing wealth as professional as own company
Preservation and achieving wealth
Continuous cash flows
Direct influence
Low correlation
Main Goals
1. Achieving profit
2. Low correlation
3. Direct influence
Expected ROI
> 15% p.a.
Expected ROI
15 to 20% p.a.
Asset Allocation
Equities:
10%
(Europe, US, Emerging markets)
Bonds:
5%
(Corporate bonds)
MM/Cash:
5%
Real Estate:
15%
(Pan-Europe, US, Asia)
AI:
60%
(PE, fund of funds, single fund)
Real Assets:
5%
Asset Allocation
Equities (Global, US, emerging markets):
10%
Bonds:
5%
(Germany, emerging markets, corporate bonds)
MM/Cash:
5%
Real Estate:
15%
(European, Asia, US/Canada, Australia, Latin America)
AI:
55%
(PE (40 FTE!), direct, fund of funds, single funds, first
timers, commodities)
Real Assets:
10%
(Infrastructure non European)
Strategy
Almost the endowment way
!
Strategy
!
The successful entrepreneur
AuM = Assets under Management, FTE = full time equivalents, ROI = Return on investment, MM = money market, AI = Alternative investments, PE = Private Equity
Source: Research, Family Office Consulting GmbH
© Family Office Consulting GmbH, 2014
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Family Office Consulting - our services at a glance
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Should you have any quieries please do not hesitate to contact us!
Family Office Consulting GmbH
Zeil 81
D-60313 Frankfurt am Main
Phone: +49 (69) 90 55 05 - 20
Fax:
+49 (69) 90 55 05 - 10
Internet: www.family-office-consulting.de
E-Mail: mherzog@family-office-consulting.de
Please contact:
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- Managing Partner -
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